2.1 RAISING FINANCE

Question 1

2.1.1 - Internal Finance
What is personal savings / owners capital?

Answer 1

Money saved by the entrepreneur

Question 2

2.1.1 - Internal Finance
What is the pros and cons of personal savings?

Answer 2

PROS:
- Easy access
-

Question 3

2.1.1 - Internal Finance
What is retained profit?

Answer 3

Is when a business makes a profit, it can leave some or all of this money in the business and reinvest it in order to expand.

Question 4

2.1.1 - Internal Finance
What is the pros and cons of retained profit?

Answer 4

PROS:
- Quick and convenient
- Easy access to the money
- No interest payments to make

CONS:
- Once the money is gone, it is not available for any future unforeseen problems the business might face

Question 5

2.1.1 - Internal Finance
What is sale of assets ?

Answer 5

• Selling products owned by the business.

Question 6

2.1.1 - Internal Finance
What is the pros and cons of sale of assets?

Answer 6

PROS:
- Can create space for more profitable uses
- Can be quick
- Raise money from unused equipment

CONS:
- Might not get the full market value of the assets or even be able to sell them at all
- Might need the assets in the future

Question 7

2.1.2 - External Finances
What is family and friends as a source of finance ?

Answer 7

Businesses can obtain a loan or be given money from family or friends that may not need to be paid back or are paid back with little or no interest charges.

Question 8

2.1.2 - External Finances
What are the pros and cons of family and friends?

Answer 8

PROS:
- Low interest
- Money may not need to be paid back

CONS:
- Money may be lost if the business fails
- Arguments may occur between family members

Question 9

2.1.2 - External Finances
What is banks as source of finance?

Answer 9

Is money borrowed from a bank by an individual or business. A bank loan is paid off with
interest, over an agreed period of time, often over several years.

Question 10

2.1.2 - External Finances
What is the pros and cons of bank loans?

Answer 10

PROS:
- Easy and quick to access
- Can get a significant amount of money at one time

CONS:
- Have to pay interest
- Difficult for a new business to access

Question 11

2.1.2 - External Finances
What is peer-to-peer funding as source of finance?

Answer 11

An alternative form of business finance which allows individuals or businesses to lend directly to other people or businesses, bypassing traditional banks.

Question 12

2.1.2 - External Finances
What is the pros and cons of peer-to-peer funding?

Answer 12

PROS:
- Convenient and faster
- Affordable way to secure a loan

CONS:
- Limited protections for investors
- Default on loans

Question 13

2.1.2 - External Finances
What is business angels?

Answer 13

Wealthy individuals who invest their own money in new businesses in exchange for a share of the company. They are often entrepreneurs or people with business experience

Question 14

2.1.2 - External Finances
What is the pros and cons of business angels ?

Answer 14

PROS:
- Providing mentorship, industry expertise
- Access to their network

CONS:
- Share of company ownership
- Possibility of conflicting ideas

Question 15

2.1.2 - External finances
What is crowd funding?

Answer 15

Is a way of raising money to finance projects and businesses

Question 16

2.1.2 - External Finances
What is the pros and cons of crowd funding?